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NORTHEAST FLORIDA: Rediscovering The Fountain Of Youth

Northeast Florida, the so-called First Coast, is hardly uncharted territory.

But in the story of Florida’s modern growth, cities like Miami, Orlando and Tampa have taken center stage. It is only recently that people have retraced explorer Ponce DeLeon’s steps and flooded Jacksonville and nearby towns. Today, two of Northern Florida’s counties (Flagler and St. Johns) were among the top 10 fastest growing counties in the United States, for the year ending June 30, 2004, according to the U.S. Census Bureau.

Its colonial history dates back to 1513. That’s when Ponce DeLeon set foot in Northeast Florida and “discovered” the famed Fountain of Youth after meeting the indigenous peoples. (They towered over the European explorers due to the well’s sulfur content, leading DeLeon to fantasize about its restorative properties.) St. Augustine was soon established nearby, becoming the first colonial city in North America.

Jacksonville is the economic anchor driving the growth. The city has risen in prominence as more people have relocated to its surrounding counties, such as Flagler and Volusia. Its profile has also been bolstered by an NFL franchise—the Jaguars—and the fact that it hosted the 2005 Super Bowl. Moreover, it is not far from Daytona, which has the dual distinction of being a massively popular haunt for Spring Breakers and the headquarters of America’s fastest growing sport: NASCAR.

Retail, though, has been slow to follow. The area has enough Wal-Marts and Publix supermarkets to serve 1.25 million people. But between Savannah, Ga., and Daytona Beach, Fla., and as far west as Pensacola, Fla., there is only one lifestyle center, St. Johns Town Center, according to Colliers Dikinson. Upscale retailers have opted for other Florida cities like Miami and Orlando.

“Jacksonville is definitely underserved by the high-end retail,” says Rick Sutton, senior retail specialist for Grubb & Ellis/Phoenix Realty Group. “If you want to go to a Nordstrom or Neiman Marcus, you still have to leave the area. But we expect that to change.”

The 1.1 million-square-foot St. Johns Town Center, which opened in March and was co-developed by Simon Property Group and Ben Carter Properties LLC, took a big step in that direction by bringing 39 new retailers to the area, including Apple Computer, J. Crew, Coldwater Creek, J. Jill and Hollister Co. Its debut even made the front pages of the local papers. A local TV station broadcast live from the center every day for two weeks,.

Although Simon won’t release sales figures, independent analysts say the center is doing well enough to demand and get $30 a square foot in rent—double the area average. St. Johns Town Center also includes the area’s first P.F. Chang’s and Cheesecake Factory. The project also has a power center with Target and Wal-Mart, a Homewood Suites Hotel and 450 multi-family units.

Plans are under way for a second phase, which will include 200,000 square feet of retail and restaurants along with two department stores. There are rumors that Simon is in discussions with Nordstrom or Neiman Marcus to be a part of that second phase.

Recent changes in infrastructure are now making it easier for retailers to tap in to Jacksonville’s vibrancy. In the past, the area’s settlement patterns made regional shopping difficult. Most of the high-income customers live either along the St. Johns River or 10 miles away on the Atlantic Ocean. Yet the obvious solution—building a property between these two clusters—was impossible because of a lack of any major east-west highways connecting the two zones.

“If you could put all those [high-income] people together and put them in a five-mile concentric ring, Jacksonville would have been easy to figure out,” says Paisley Boney, CEO of Ben Carter Properties. “But a lot of retailers, when they came to Jacksonville and saw the demographics grow, had a hard time finding a road strategy that served the town.”

Now, the soon-to-be-completed Interstate 295 near the Town Center will make the city much easier to navigate. “No question that it’s only a matter of time now before more retailers come,” says Boney.

Rents in southern Jacksonville have gone up from an average of $13 a square foot to about $17 a square foot. “In Jacksonville, it kind of makes you flinch,” says Sutton. “It’s high numbers that you expect to see in Miami.”

Limited land has now pushed retail development into the more working-class sections of northern Jacksonville.

Ramco-Gershenson Properties Trust is building the 1.3 million-square-foot River City Marketplace. It is expected to be a boost to this part of the city, where occupancy rates hover around 78 percent, well below the regional average of 94 percent. River City’s first phase will be completed in 2006 with 400,000 square feet of retail including a Super Wal-Mart, Circuit City and Old Navy. The company also is negotiating to add 900 residential units and a hotel.

Until recently, Jacksonville’s downtown had been long neglected as people moved to the suburbs. But there is now an influx of residents, with many of the downtown’s older hotels being converted to condominiums. “It was kind of stagnant here with a lot of things going on in the day, but at night everyone went home,” says Sutton. “But with the new condos, it has brought a lot more activity.”

It also has brought new retail development. In 2003, local Jacksonville developer Sleiman Enterprises bought Jacksonville Landing—the 180,000-square-foot restaurant and retail destination built nearly 20 year ago—from the Rouse Co. for $5.1 million. Sleiman plans to invest $200 million to $250 million to expand the center to 1 million square feet and turn the property from an underused marketplace to a regional entertainment destination with retailers, a hotel, condominiums and office space. Sleiman is still in discussions with local officials over the donation by the city of 11.2 acres underneath and in close proximity to the project.

Outside Jacksonville, a major housing boom has people flooding the First Coast. Here, as in many parts of Florida, developers are not just building retail or mixed-use projects; they are building miniature cities, called Developments of Regional Impact, or DRIs. DRI is a special designation required by the state for any large development that involves new infrastructure and a high number of building permits.

For example, in the fast-growing northern end of St. Johns County, there about 11 DRIs are under development and three are awaiting approval. Much of northeastern Florida’s newcomers and retailers are going to these enormous developments.

One DRI, Oakleaf Plantation, on the border of Duval and Clay counties, is a 6,400-acre master-planned community approved for 11,000 homes, five schools, a public library and 5.8 million square feet of commercial, office and industrial space. “Generally, retail in these DRIs are just basic services for the population,” says Lill Hanson, senior associate with the retail group of Grubb & Ellis/Commercial Florida.

Areas that are now being swamped with DRI construction, such as exploding St. Johns and Flagler counties south of Jacksonville, have limited retail opportunities. “I think that the retail there is to accommodate the population, but as far as major department stores, there just aren’t any,” says Louis Galant, director of research for commercial real estate firm Colliers Dickinson. “Someone who wants to shop at a Dillard’s around here has to go to Jacksonville or Daytona Beach.”

Although Flagler County was the fastest growing county in the U.S. on a percentage basis for the year ending June 2004, its population is still only 68,682.

“There are certain population thresholds that are needed to attract certain types of retail and we are not quite there yet,” says Jim Smith, assistant county manager administrator of economic development for Flagler County. Home Depot and Wal-Mart is there, and Target and Lowe’s are both looking for locations. But residents still have to drive north to St. Augustine or south to Daytona Beach to go to a mall.

However, unique retail opportunities are on the horizon. In Volusia County, south of Flagler, Casto Lifestyle Properties is working with International Speedway Corporation to build a 50-acre mixed-use venture across from the Daytona International Speedway in Daytona Beach, Fla. The $75 million project. The development, expected to be completed by early 2007, will also include 45 condominiums for residents who don’t mind the noise of the nearby racetrack.

CBL & Associates Properties Inc. also has plans to build in Flagler County, with their Palm Coast project slated to add about 425,000 square feet of retail. A representative from the company refused to comment, saying no official announcements have yet been made.

But it seems to be only a matter of time now before more retail pours down the Atlantic coast south of St. Johns Town Center. The population is expected to climb 15 percent by the end of 2010 to about 1.43 million.

“People always say ‘it’s got to slow down at some point’, but we don’t see any of the residential slowing down,” says Sutton. “They just continue to build rooftops.”

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